Apartment Trends

Multifamily a Trillion Dollar Business

To those who live and breathe the multifamily business, it’s all about the bottom line. The economic impact of an apartment community is measured in net operating income, revenue and expense, debits and credits.

But if you step back and consider the economic impact a new apartment community has on its neighborhood—and further, the industry’s impact on the national economy—you’d be astounded.

The first and most obvious factor is construction spending, and several studies quantify just how many jobs are supported via development. But that’s just the tip of the iceberg: The financial contribution of ongoing operations, not to mention resident spending, paints a much more complete picture of multifamily’s might.

Yet, the impact of these three elements—construction, operations, and resident spending—had never been fully measured, until now. A study released Tuesday by the National Multi Housing Council and the National Apartment Association is the first to quantify the gross domestic product of the multifamily industry.

The study found that apartment industry spending contributes $1.1 trillion to the national economy and supports 25.4 million jobs.

“People underestimate the economic impact that flows from apartment buildings,” says Stephen S. Fuller, an academic researcher at George Mason University’s Center for Regional Analysis who conducted the study.

“It’s always that first splash of new construction that gets the attention,” Fuller notes. “No one pays attention to ongoing maintenance or to the people who live in these properties. By not paying attention to them and the long-term effect they have, people underestimate the importance to the overall economy.”

Multifamily construction contributed $42.5 billion to the national economy, and construction spending spurred $12.7 billion in personal earnings, while supporting roughly 324,000 jobs, in 2011. That’s nothing to sneeze at. But it’s worth noting that resident spending on goods and services produces an economic impact nearly four times greater than construction.

Apartment resident spending drove nearly 80 percent of the apartment industry’s total contribution to the national economy and sustained nearly 90 percent of total jobs supported by the apartment industry. In 2011 alone, the country’s 35 million apartment residents contributed $885.2 billion to the national economy. Renter spending also generated $222 billion in additional personal earnings and supported 22.8 million jobs during the year.

“Renters spend more of their income locally than homeowners,” Fuller points out. “These renter households generate a lot of jobs that ordinarily wouldn’t be associated with the apartment industry.”

Based on average spending and after-tax earnings, apartment residents collectively had $628.5 billion in disposable income in 2011. Nearly three-quarters of that amount, or $421.5 billion, was spent on consumer goods and services produced in the United States.

Apartment residents spent a significant portion of those available dollars on housing, food, and transportation—their three largest expenditures—followed by utilities, fuels, and public services; apparel and services; and entertainment. Roughly 70 percent of the dollars spent on those items stayed within the local economy.

In addition, the industry spent $67.9 billion on apartment operations in 2011. And that spending directly supported local employment and business activities across four main categories: utilities; repairs and maintenance; management; and building services, including materials and labor costs. When the indirect effects of that spending are factored in, the operation and maintenance of the nation’s entire stock of apartments had a total economic contribution of $182.6 billion.

“This research supports the idea that multifamily is critically important to the economy,” Fuller says. “People who consider multifamily to be second class … to be undesirable in their communities … they have no sense that it is a major economic force.”